Having a background in sociology, philosophy, and economics, I'm going to try to give this blog a pretty broad scope. Going from finance and economics, to geopolitics and world news, to the occasional academic or theoretical post.
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Trouble keeps mounting for JPMorgan Chase. Only a few weeks after the so-called London Whale debacle, the Federal Energy Regulatory Commission (FERC) has filed a petition against the bank in the context of an investigation into the alleged manipulation of energy markets in California and the Midwest.

A petition filed Monday at a federal court in Washington DC revealed that FERC is conducting an investigation into JPMorgan’s “abusive” bidding strategies in energy markets, possibly inflating prices by more than $73 million.

FERC has served JPMorgan with at least two subpoenas since April, as the bank headed by Jamie Dimon has refused to hand over at least 25 emails with potentially sensitive information. The regulator is now asking the court to force the bank to hand those over, while investigating the potential violation of JPMorgan’s “duty to make truthful and nonmisleading communications to the Commission and regional energy market operators.”

The regulator is accusing JPMorgan of using at least four “abusive” bidding strategies that have helped it extract “exaggerated” payments from wholesale markets in the Midwest and California. Complaints coming from the California Independent System Operation (CAISO) and the Midwest Independent Transmission Operator (MISO) sparked an investigation into how JPMorgan was potentially gaming the system to its own benefit.

Forbes reached out to JPMorgan for comment. While their communications department had been reached, no statement had been received at the time of writing.

In the filing, which pertains to how the bank is refusing to hand over emails that FERC claims aren’t protected by the “attorney-client privilege,” the regulator notes three of those techniques have resulted in $73 million in improper payments to generators. JPMorgan has handed over 28 emails, many of those between Blythe Masters, head of the global commodities group, and Francis Dunleavy who heads the principle investments for that group.

One of the techniques described in CAISO’s complaint to FERC, which doesn’t directly mention JPMorgan (even though FERC confirmed the bank was the party in question), showed how the bid-cost recovery mechanism was gamed in a way so as to trigger overpayments in excess of 50%. The bid-cost recovery mechanism is supposed to provide make-whole payments that cover start-up and minimum load costs for parties requesting electric energy.

Instead, JPMorgan’s bidding strategy allowed it to duplicate market revenues, resulting in at least $56.8 million from August 2010 to February 2011 in excess payments. While it isn’t entirely clear from the filings if this figure is included in the $73 million in improper payments previously mentioned, it suggests that the total number will be higher when accounting for all four bidding techniques.

FERC was one of the regulators that dealt with Enron’s manipulation of Californian energy markets in the early 2000s. Tapes showed how Enron traders arranged to cut energy during the California electricity crisis of 2000 and 2001, with Enron being forced to fork over at least $1.5 billion to settle in 2005. FERC is in charge of regulating utilities like ConEd, Duke Energy, and Southern Company, among others.

JPMorgan has been under fire recently after a trading blunder evolved into losses that could potentially hit $9 billion. Originally considered a “tempest in a teapot” by chief executive Jamie Dimon, the losses were first put at $2 billion-plus. Later reports suggested they could hit $9 billion in a worst-case scenario; the latest estimates have the so-called London Whale losses at $4 to $6 billion. Regulators grilled Jamie Dimon in Congress and are investigating if the losses could pose a greater danger to the financial system.

While having to deal with that mess, JPMorgan could potentially face a difficult situation with FERC as well.

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You are in a powerful position as a contributor to Forbes. Can you write an article directly asking other journalists and people to mount a campaign for bringing back jail time for corrupt bankers? After Savings and Loan scandal, 1800 bankers were sent to jail. Now, the only person was Bernie Madoff, and that’s because he ripped off the 1% and not the 99%